Financial education |23 June 2023
Operating model of a Protected Cell Company
Protected Cell Companies
The Financial Services Authority (FSA), as the regulator for non-bank financial services in the Seychelles, has under its licensing portfolio the mandate for the registration of Protected Cell Companies (PCC). A PCC may be a company incorporated under the International Business Companies Act, 2016 (IBC Act) or the Protected Cell Companies Act, 2003 (PCC Act) by lodging a PCC application with the FSA.
A protected cell company or PCC is a corporate structure, limited by shares, which consists of two parts, a core or non-cellular part and one or more protected cells (the cells). A PCC has a similar design to a hub and spoke, where each cell is separate from one another and operates independently, and thereby allows for legal segregation and protection of income, assets and liabilities. This legal segregation is known as ‘ringfencing’.
Setting up a PCC in Seychelles
PCCs in Seychelles can be incorporated or may be registered by way of conversion from an existing company provided that the incorporation and registration requirements prescribed in the Companies Act, 1972 and the IBC Act or PCC Act are satisfied.
PCCs under the Protected Cell Companies Act, 2003
All applications for a PCC should be submitted to the FSA as laid down in section 3 of the FSA’s Application Guidelines for a PCC. In the case of a conversion, additional requirements prescribed in section 2.8 of the Application Guidelines for a PCC must be satisfied. All applications must be submitted to the FSA through a licensed International Corporate Service Provider (ICSP) in Seychelles.
All PCC applications should be accompanied by a detailed business plan, name reservation certificate from the Registrar of Companies along with corporate statutory documents and respective application fee.
In accordance with the Companies Act 1972, a protected cell company shall have at least two individual directors. There is no provision for companies to be appointed as directors of a PCC. The secretary must be an ICSP in Seychelles who will be responsible for submitting and authenticating signatures on all documents submitted to the Authority. The ICSP is responsible to conduct all enquiries and due diligence checks under the ‘Know Your Customer’ norms.
The name of the company must include the expression ‘Protected Cell’, or its abbreviation ‘PCC’ (or any or similar expression approved in writing by the FSA). This title is included to inform all parties transacting with the company of its PCC status. Also, each cell should have its own distinct name or designation.
Once the company is established, the PCC is required to pay annually with the FSA the registration fee specified under the Protected Cell Companies (Fees) Regulations, 2004, on or before the annual anniversary date of its incorporation or conversion. Additionally, the PCC’s annual returns should be filed with the Registrar of Companies in accordance with the Companies Act, 1972.
PCCs incorporated under the IBC Act
Similarly, the Seychelles IBC Act also allows for an international business company (IBC) to operate as a protected cell company. In order to be incorporated, continued or converted as a PCC, the proposed registered agent (a Seychelles ICSP) must apply to the Registrar of IBCs to reserve the proposed name of the PCC. Prior to incorporation, continuation or conversion of the company as a PCC, written approval is required from the FSA.
As per section 25(2) of the IBC Act, the name of a protected cell company shall end with the words ‘Protected Cell Company’ or with the abbreviation ‘PCC’.
A Seychelles PCC is allowed to engage in insurance activities, mutual funds and any other business activity approved by the FSA. It is necessary that such companies require applicable licences in respect to the activity or activities to be conducted by the PCC in accordance with the laws of the jurisdiction where they conduct their business.
Applicable to PCCs incorporated under both the PCC Act and the IBC Act described above, it is to be noted that while a PCC is a single legal entity, it may create segregated cells such that each cell is legally separate of the other cells, whether corporately or individually owned. For this reason, protected cell companies are also referred to as special purpose vehicles.
The core part of a PCC comprises all non-cellular assets including the company’s core share capital, investments and liabilities. The cells of a PCC themselves are not companies but have sufficient attributes such that they may engage in trade. Each cell of a PCC can be used for a specific investment objective or strategy, or even for specific clients. The number of cells that can be created is unlimited. The cells are independent of each other and from a legislative point of view are protected from each other. Provided that the applicable legislation is complied with, the assets of any one particular cell are only available to the shareholders and creditors of that cell. Creditors of another cell have no recourse against them.
Seychelles PCCs are required to have a single board of directors who has the ultimate responsibility for the transactions within the core and each of the cells of the PCC and for the statutory and regulatory compliance and corporate governance requirements of the company as a whole. Transfer of cellular assets to any cell in the PCC is common practice whereas transfer of non-cellular assets is not possible. However, in the event that the cellular assets of one cell have been exhausted, the company’s core assets may be secondarily liable to satisfy any cellular liability of one of its cells.
As a special purpose vehicle, the PCC allows for isolation of risks, sharing of operational costs and provides more opportunities, flexibility and security for international investment structuring. In view of its benefits, PCCs are commonly used in relation to the following activities:
- Asset holding
- Structured Finance Business
- Collective Investment Schemes/ Close Ended Funds
- Specialised Collective Investment Schemes
- Captive Insurance Business.
For more information on the application procedures for setting up a PCC, please visit the FSA’s website on https://fsaseychelles.sc/ or alternatively contact the FSA’s Fiduciary Supervision Section by email at fiduciary.supervision@fsaseychelles.sc
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